Russia Overtakes Germany To Become Europe’s Largest Economy

This about Economy, tagged , , , was written by for on July 12, 2013

See data. For real, this time.

russian-gdp-overtakes-germany

While it is perhaps a big strange to start thinking of Russia as a high-income economy, it’s not so surprising when looking at concrete statistics such as vehicle consumption, Internet penetration, etc. – all of which are now at typical South European and advanced East-Central European levels (even if there’s still some way to go to converge with the likes of France or the US).

In per capita terms, this means that the average Russian is now about as rich in terms of real goods he can buy on domestic markets as a typical citizen of Portugal, Greece, Estonia, Poland, or Hungary (though with the caveat that most of the latter places have a lot less income inequality). Below is a table showing the GDP per capita, PPP (current international $) of Russia and comparable countries:

  2008 2009 2010 2011 2012
Czech Republic 25,885 25,645 25,300 26,209 26,426
Portugal 24,939 24,892 25,547 25,586 25,305
Slovak Republic 23,210 22,546 23,149 24,112 24,896
Greece 29,604 29,201 27,539 25,859 24,667
Russian Federation 20,276 19,227 20,770 22,408 23,549
Lithuania 19,559 16,948 18,120 21,554 23,487
Estonia 22,065 19,470 20,092 21,996 23,024
Chile 16,435 16,190 18,607 21,001 22,655
Poland 18,021 18,796 20,036 21,133 21,903
Hungary 20,432 20,249 20,734 21,455 21,570
Latvia 18,090 15,928 15,944 19,103 21,005
Croatia 20,215 19,158 18,546 19,817 20,532
Turkey 15,178 14,578 15,965 17,242 17,651
Brazil 10,393 10,357 11,187 11,634 11,909
China 6,202 6,798 7,569 8,408 9,233
Ukraine 7,311 6,312 6,691 7,215 7,418

Furthermore, it’s looking as if Russia might have a real chance of overtaking Portugal next year. Just as Putin promised in 2003! (Double GDP; overtake Portugal in 10 years). But even if that fails, at least overtaking Greece is all but assured, so even if Russia misses out on Portugal it will still get to say it is no longer the poorest “proper” European country.

On Defending The Soviet Union

This about Economy, tagged , , , , , , , was written by for on July 12, 2012

scylla-charybdis-and-meContrary to what some might try to take from my post on the longterm failure of the Soviet economy, I am not an anti-Soviet ideologue. I loathe lies about its achievements and the blanket condemnations directed its way by moralistic poseurs every bit as much or more than I detest reality-challenged attempts to paint it off as some kind of utopia or at least superior to alternative paths of development.

After communists, most of all I hate anti-communists. – Sergei Dovlatov, Soviet dissident.

On the latter point, I especially notice a tendency to ignore wider historical and comparative context. In the crudest cases, Russian literacy rates and GDP are compared with those of the Tsarist era: Yes, of course the average Soviet citizen c.1980 lived far better than the average Russian citizen in 1913, but then again, so did the average citizen of EVERY OTHER European country. The more important question to ask: Would the average Russian have been better off had the Russian Empire continued on its natural development trajectory without the distortions of Stalinist central planning? Yes, he almost certainly would have, as per comparison with, say, Finland (the sole part of the Empire that didn’t go Communist), or even the Mediterranean periphery nations.

Alternatively, they say that the USSR nonetheless managed to be richer than the “Third World”, as if that was some kind of achievement. Of course it was not, as (1) they were much less advanced than the Russian Empire even in 1913, and (2) their low national IQ’s would have precluded, and continue to do so, convergence with the rich world anyway; a weakness that Russia *doesn’t* suffer from. But the evidence is simply too overwhelming to be deniable: China; North Korea; Cuba; to a lesser extent, the ex-Soviet countries and Eastern Europe – all these nations, which have little in common except insofar as they suffered from the scourge of Communist economics, are ALL glaring and consistent downwards exceptions to the otherwise remarkably tight correlation between levels of national IQ/human capital and GDP per capita. (Of course a further problem here is that hardcore Soviet apologists tend to be cultural Marxists and deny Human Biodiversity and intelligence theory).

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Russian Wages Are Fast Converging To Western Levels

This about Economy, tagged , , , was written by for on June 21, 2012

Via The Economist, I’ve come across some fascinating research by Orley Ashenfelter and Stepan Jurajda (Comparing Real Wage Rates, 2012) showing how real wages can be meaningfully compared across different regions by taking notes on prices and wages in McDonald’s restaurants.

The methodology seems solid. Big Macs are a very standardized product, hence they are already used in the so-called Big Mac Index to assess international price differences (and whether currencies are undervalued or overvalued) and REAL wage rates (prices tend to be lower in poorer countries, mitigating the effects of lower nominal wages). By combining these two measures, you can derive the quantity of Big Mac a McDonald’s worker can buy through one hour of his labor (BMPH). This in turn is a good proxy for real median wages, i.e. the life of the average Joe and Ivan in comparative perspective. While we might not want to people to buy too many Big Macs it’s a positive thing if they can actually afford to.

The results for Russia are stunning, and no doubt go a very long way why Putin has retained 70% approval ratings since 2000. Russia’s BMPH increased by 152% (!) from 2000 to 2007, and a further 43% through to 2011, leaving all other economic regions in the dust, even despite a sharp recession in the latter period. The only major region with a comparable performance is China. In contrast, the BMPH has stagnated throughout the developed world since 2000; and Not So Shining India joined them from 2007.

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Education as the Elixir of Growth III

This about Human Biodiversity, tagged , , , , was written by for on February 25, 2012

Just in case you thought the correlation between human capital and economic development was an artifice of the post-socialist world, here is a similar graph (R2=0.4273) for all the world’s countries that have participated in the Math and Science portions of the PISA or TIMMS (8th grade) international standardized student assessments.

education-economy-global-1

The methodology is the same as described in the previous post. As you can see, the relation is every bit as strong at the global level. However, you may point to a few outliers. How to explain them?

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Russia’s Economic “Stagnation” In Global Perspective

This about Economy, tagged , , , , was written by for on July 14, 2011

Иn the wake of the 2009 recession, declinist rhetoric has come to dominate discussion of Russia’s economic prospects. Jim O’Neill, the founder of the BRIC’s concept, has his work cut out defending Russia’s expulsion from the group in favor of Indonesia, Mexico, or some other random middle-sized country. Journalists in the Western media claim its economy is “not growing”, as do liberal Russian newspapers such as Vedomosti. Comparisons between Putin and Brezhnev (who presided over the Soviet Union’s period of stagnation, or zastoi) are piling up. Even President Medvedev isn’t helping the situation, telling a forum of international businesspeople that Russia’s “slow growth” hides stagnation (good job promoting your country, DAM! not….).

I don’t want to exchange rhetorical barbs in this post (which you may note is not tagged as a “rant“), and my skills at mockery and picking apart tropes aren’t nearly as well developed as those of Mark Adomanis or Kremlin Stooge, so I’ll do what I do best and go straight to the statistics. And so we have Fact #1: what is described as stagnation for Russia is a growth rate of 4%. It grew 4.0% for 2010. It was 4.1% in Q1 2011, and the government predicts it will be 4.2% for the whole year. The World Bank predicts 4.4% in 2011, 4.0% in 2012; the OECD expects 4.9% in 2011 and 4.5% in 2012; and the IMF forecasts 4.8% in 2011, 4.5% in 2012, tapering off to less than 4.0% in the “medium-term.”

This does not strike me as being particularly bad by global standards. This is obviously no miracle economy of Chinese-like 10% growth rates, but Russia (4.4%; 4.0%) does not compare badly to the World Bank’s projected growth for other typical middle-income countries such as Turkey (4.1%; 4.3%), Thailand (3.2%; 4.2%), Brazil (4.4%; 4.3%), Mexico (3.6%; 3.8%), or South Africa (3.5%; 4.1%). Facing real stagnation, many countries in the developed world such as the UK could only wish for Russia’s growth rate; though this is an unfair comparison, because Russia is poorer and can therefore find it easier to grow faster (see economic convergence), it is not less unfair comparing Russia to countries such as India (8.4%; 8.7%) or Indonesia (6.2%; 6.5%) because the latter are so much poorer than Russia in their turn.

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Book Review: Ha-Joon Chang – Kicking Away the Ladder

This about Economy, tagged , , , , , was written by for , on October 19, 2009

Chang, Ha-Joon – Kicking Away the Ladder: Development Strategy in Historical Perspective (2002)
Category: economy; history; industrial policy; Rating: 5/5
Summary: Kicking Away the Ladder:How the Economic and Intellectual Histories of Capitalism Have Been Re-Written to Justify Neo-Liberal Capitalism (Ha-Joon Chang)

Much has been said of the smug arrogance, cultural aloofness and end-of-history conceit characterizing the neoliberal Washington Consensus, the philosophy that a one-size-fits-all set of “good policies” (e.g. privatization, liberalization, deregulation) and “good institutions” (e.g. patent and IP protection system, etc) can – and must – be transplanted onto any country, irrespective of its historical or cultural traditions, if it were to ever join the developed “international community’. The general bankruptcy of this approach is evident from the facts on the growth, with global GDP growth during the 1960-1980 period of “bad policies” substantially higher than during the “good policies” 1980-2000 period. After seeing high growth during the earlier period, Latin America stagnated, and Africa and Eastern Europe declined during the latter; the major exception was mercantilist China.

Though always disabused by reality, from 1998 Russia to the 2008 crisis, the neoliberals retain their intellectual underpinnings by continuing to claim, like Marxists, that history itself is ultimately on their side – after all, did not Britain and the United States, the world’s greatest economic successes, rise to global preeminence through the virtues of minimal government and free trade? Not at all, argues Ha-Joon Chang in this excellent book.

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A Long Wait at the Gate of Delusions

This about Futurism, tagged , , was written by for on August 3, 2008

Sometimes, it is much simpler to expound upon one’s views on a subject by replying to and arguing against an opposing view, rather than constructing one’s own thesis. Call it intellectual laziness, a clever short-cut or whatever you not, this is what I’m going to do with the Washington Post article A Long Wait at the Gate to Greatness, in which John Pomfret argues that China is unlikely to ever match, let alone surpass, the United States as the world’s premier superpower. I will quote it in full, adding my own comments:

Nikita Khrushchev said the Soviet Union would bury us, but these days, everybody seems to think that China is the one wielding the shovel. The People’s Republic is on the march — economically, militarily, even ideologically. Economists expect its GDP to surpass America’s by 2025; its submarine fleet is reportedly growing five times faster than Washington’s; even its capitalist authoritarianism is called a real alternative to the West’s liberal democracy. China, the drumbeat goes, is poised to become the 800-pound gorilla of the international system, ready to dominate the 21st century the way the United States dominated the 20th.

The key difference is that China is a demographic giant. This means that to match the US in gross GDP (one of the key criteria for superpower status), it need only advance to around a quarter of its per capita development, or Mexico’s level. To match the West (and be double the US), it need only reach Portuguese standards.

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Education as the Elixir of Growth

This about Human Biodiversity, tagged , , , , , was written by for on March 10, 2008

What are the reasons behind the wealth and poverty of nations? Since this question has exercised the minds of thinkers from Adam Smith to David Landes, Jared Diamond and Richard Lynn, I decided to take a look at it myself. I came to the conclusion that while geography, macroeconomic policies, resource windfalls and the microeconomic environment do play important roles, by far the most important factor is the state of a country’s human capital – things like literacy rates, school life expectancy and performance on international student assessments.

This is not a new idea. A Goldman Sachs report, Dreaming with BRICs, noted that:

Many cross-country studies have found positive and statistically significant correlations between schooling and growth rates of per capita GDP—on the order of 0.3% faster annual growth over a 30-year period from an additional one year of schooling.

However, I think education is much more central to this. The problem with using years of schooling as a yardstick is that in many middle-income countries, like Argentina, Turkey or Brazil, the amount of schooling is converging to that of the developed world, but the quality isn’t. This is attested to by their performance on international student assessments like PISA. For instance, in the 2006 PISA Science assessment, only 15.2% of Brazilians were at Level 3 or higher (the threshold for moving beyond purely linear problem-solving), compared with 47.6% of Russian, 51.3% of American and 66.9% of Australian students. Is it really then surprising to discover that from 1997 to 2007 purchasing power GDP per capita in Brazil and Russia, both medium-income countries, has grown at 1.3% and 6.0%, respectively, i.e., that Russia is playing the game of economic catch-up much more successfully?

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Mailbag: Back from a Russian Century?

This about Futurism, tagged , , , was written by for on January 13, 2008

Four days and 50 reader views into our baby blog’s existence, we have been priveleged to receive a number of letters to our darussophileATyandexDOTru address. All of them deal with our Towards a New Russian Century? core article (which is, in addition, the most popular item on this blog by far – possibly because colleen was kind enough to link his winthrop88 blog to it).

The biggest critique of it, voiced by colleen and the letter writer DP, was my neglect of the topic of peak oil in my analysis of geopolitics in the next 20-30 years.

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Towards a New Russian Century?

This about Futurism, tagged , , , , was written by for on January 11, 2008

EDIT 11/27/08: Since writing this, I have come to realize that peak oil is real and will play a major role in any future scenario, and far sooner than the other three themes I highlight here.

The twentieth century was, above all, a Russian century. Granted, Germany was the most important challenger Great Power in the first half of the century, while in the second the United States begun to assert itself on the world stage. Nonetheless, Russia, under its Soviet incarnation, was the key focal point of world history. It is hard to imagine a movement like Nazism arising in Germany, or indeed fascism in general, without the spectre of communism hanging over a country. Similarly, the US was only brought permanently out of its traditional isolationism by the Truman Doctrine – their pledge to “support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures”, or, in other words, to contain communism.

This article will be about Russia’s place in the world in around 30 years time. In particular, will it be able to reclaim its former mantle as a superpower? Does it have the potential to usher in a new Russian century?

Firstly, we must define what a superpower is. Let us assume that it is a state with a leading position in the international system and the ability to influence events and project power on a worldwide scale. Furthermore, it must be strong on multiple planes of power – not only in the military sphere, but also in ‘softer’ areas like the economic base and cultural influence.

(Chinese political scientists have developed a metric for state power called Comprehensive National Power. There is no generally agreed-upon method by which different components of power are weighted and totalled. Nonetheless, virtually all of them have the US leading the pack, with Russia, Japan, China, France, the UK and Germany following behind in a cluster.)

Today, the world’s only country with the whole plethora of attributes – economic, technological, political, military and strategic – that make a state a superpower is the United States. Nonetheless, there are important trends at work that threaten to undermine this full-spectrum dominance. We have identified the three most important of these as economic (re)convergence, exponential growth in IT and global climate change.

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